Earlier this week, we learned that our shared prosperity is at risk if Ontario does not adopt a different plan to achieve longterm economic growth.
Moody’s Investors Service, one of the leading international credit agencies, changed the outlook on the province’s ratings to negative from stable. In their statement, they argue “spending pressure will challenge the province’s ability to sustain balanced fiscal results across multiple years.”
They are concerned a slowing economy will struggle to maintain the ambitious, new spending pressure that was announced as part of the 2018 Ontario budget, compounded by projections our GDP is projected to drop from 2.7% to 1.7% growth by 2021.
This clarion call cannot be ignored. Harsher credit ratings make it pricier for governments to borrow money. In turn making it more difficult to plan for future spending.
As Moody’s reminds us in their statement, much of the positive movement within our economy has been due to low interest rates, giving consumers more confidence to take on debt.
This is, of course, unsustainable. Interest rates will go back up and when they do, consumer spending will go down. This will impact the whole of our economy and put pressure on the ability of the Government of Ontario to maintain its rosy outlook.
The announcements about pharmacare and child care expansion, as well as other initiatives were welcome by many Ontarians when first announced by the Wynne government this March. But they are tantamount to the promise of a pony when parents can hardly afford the barn.